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Can the bank force you into an impound account for taxes?

My friend was deliquent on her taxes and the bank paid them and increased her payments by $1,000. She can't afford this. She planned on making good on her taxes in June 2008. What happens if she just pays the P & I payment only. Can they forclosue on her?

livinginnky's picture
livinginnky | Joined: September 8, 2007 08:31 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:2e8efc9e7f]increased her payments by $1,000.[/quote:2e8efc9e7f] For how long?

They are protecting their investment. If the taxes where added as a lien to the house before she paid them the bank would be 2nd in position to get there money during foreclosure instead of 1st.

Had she worked out the June payment with whoever collects the taxes?

Now as far as forcing her to pay... I don't think they can charge her interest. But the whole thing probably depends on what her note says. Does her mortgage state that this would happen if the taxes were not paid?

Only an attorney licensed in her state could say for sure who has what rights.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:34 | Post subject:

jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello,

I think it will be better if she clearly states her situation to the bank. They might help her to find a way out by some alternative options to pay the increased amount due to this tax default, keeping the monthly mortgage payments as before.

If she is unable to make the monthly payments all together, then they might foreclose on her property.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:34 | Post subject:

evolovik26's picture
evolovik26 | Joined: August 15, 2007 11:43 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Most mortgage notes state clearly that you are responcible for paying taxes and insurance. If you dont bank has the right to collect from you the needed ammount through escrows. I am sure she can call the lender and work out a plan that works better for her. But taxes are very important.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:34 | Post subject:

livinginnky's picture
livinginnky | Joined: September 8, 2007 08:31 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Lets clarify.

Here is what can happen in this situation and why, as Eugene stated, the bank adds that clause.

Say you owe $10,000 in taxes. Say you have a home you purchased Jan 2007 for $100,000. You financed it at 100% of its value and have made all of your payments on time. You never miss a bill and for whatever reason you don't pay your taxes. Guess what? The tax collector can foreclose on your house. Seriously! They get their $10,000 and whatever the bank gets is what they get. Your lender doesnt' even get a choice. They have to take what they get. So they stand to lose up to 100% of their investment because of a $10,000 tax bill. Does it always happen? No. Can it? Absolutely!

So you see your lender has every reason for making sure that the taxes and insurance (for similar reasons) are paid on time.

I agree that they are being unfair but that also depends on how much the taxes where.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:34 | Post subject:

Jessica's picture
Jessica | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

I suppose your friend's lender may have come to know of her unpaid taxes from the notification sent by third party companies whose business is to go to all county offices and get a list of tax delinquencies. Generally when anyone signs the loan documents, he has to pay for the Tax service. This is to pay such third party companies who collect tax payment related details.

I sympathize with your friend but the lender isn't unjustified. He's there to collect your tax payments so that the government doesn't place a lien on your property. And, if it does, it can even override the lender's rights on your property.

Even if the lender can sell the property, he has to pay off your taxes to the government and then he gets the remaining amount. So, in a way, he's losing his money and why would he want to! And, that isn't bad as they are in business.

Perhaps tax liens are a reason why lenders ask the borrowers to pay taxes into an impound account. This makes the latter keep aside money to make payments towards taxes. Otherwise unpaid property taxes are often treated as something that can create a superior lien on property as compared to that of the lender's interest in your property.

I hope your friend understands that there's no way out for her but to pay the taxes. However, if she cannot afford the rise in payments, then it's best for her to have a talk with the lender. Things get more clear when you talk and get clarified.

Regards,

Jessica.

Like | Dislike | Share | Posted: Fri, 02/05/2016 - 00:34 | Post subject:

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